Ten Tax Tips for Individuals Selling Their Home

If you’re selling your main home this summer or sometime this year, the IRS has some helpful tips for you. Even if you make a profit from the sale of your home, you may not have to report it as income.
Here are 10 tips from the IRS to keep in mind when selling your home.
1. If you sell your home at a gain, you may be able to exclude part or all of the profit from your income. This rule generally applies if you’ve owned and used the property as your main home for at least two out of the five years before the date of sale.
2. You normally can exclude up to $250,000 of the gain from your income ($500,000 on a joint return). This excluded gain is also not subject to the new Net Investment Income Tax, which is effective in 2013.
3. If you can exclude all of the gain, you probably don’t need to report the sale of your home on your tax return.
4. If you can’t exclude all of the gain, or you choose not to exclude it, you’ll need to report the sale of your home on your tax return. You’ll also have to report the sale if you received a Form 1099-S, Proceeds From Real Estate Transactions.
5. Use IRS e-file to prepare and file your 2013 tax return next year. E-file software will do most of the work for you. If you prepare a paper return, use the worksheets in Publication 523, Selling Your Home, to figure the gain (or loss) on the sale. The booklet also will help you determine how much of the gain you can exclude.
6. Generally, you can exclude a gain from the sale of only one main home per two-year period.
7. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is usually the one you live in most of the time.
8. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523 for details.
9. You cannot deduct a loss from the sale of your main home.
10. When you sell your home and move, be sure to update your address with the IRS and the U.S. Postal Service. File Form 8822, Change of Address, to notify the IRS.

If You Receive an IRS Notice, Here’s What to Do

Each year the IRS sends millions of letters and notices to taxpayers. Although some people may feel anxious when they receive one, many are easy to resolve. Here’s what to do if you receive a letter or notice from the IRS:

1. Don’t panic. Follow the instructions in the letter.

2. There are many reasons the IRS sends notices to taxpayers. The notice usually covers a specific issue about your account or tax return. It may request payment of taxes, notify you of a change to your account or ask for additional information.

3. If you receive a notice about a correction to your tax return, you should review it carefully. You usually will need to compare the information in the notice to the entries on your tax return.

  • If you agree with the correction, you usually don’t need to reply unless a payment is due.
  • If you don’t agree with the correction the IRS made, it’s important that you respond as requested. Respond to the IRS in writing to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left corner of the notice. Allow at least 30 days for a response from the IRS.

4. There is no need for you to call or visit an IRS office to answer most IRS notices. If you have questions, call the telephone number in the upper right corner of the notice. When you call, have a copy of your tax return and the notice available.

5. Keep copies of any correspondence with your tax records.

For more information about IRS notices and requests for payment, see Publication 594, The IRS Collection Process. For information about penalties and interest charges, see Publication 17, Your Federal Income Tax for Individuals. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

 

 

IRS Opens Online FATCA Registration System

WASHINGTON — The Internal Revenue Service today announced the opening of a new online registration system for financial institutions that need to register with the IRS under the Foreign Account Tax Compliance Act (FATCA).
Financial institutions that must register with the IRS to meet their FATCA obligations can now begin the process of registering by creating an account and providing required information. Financial institutions will also be able to provide required information for their branches of operation and other members of their expanded affiliate groups in which the financial institution is the lead organization.
The registration system, designed to enable secure account management, is a web-based application with around-the-clock availability.
Within a secure environment, the new registration system enables financial institutions to:
  • establish online accounts;
  • customize home pages to manage accounts;
  • designate points of contact to handle registrations;
  • oversee member and/or branch information; and
  • receive automatic notifications of status changes.
Financial institutions are encouraged to become familiar with the system, create their online accounts and begin submitting their information. Starting in January 2014, financial institutions will be expected to finalize their registration information by logging into their accounts, making any necessary changes and submitting the information as final.
As registrations are finalized and approved in 2014, registering financial institutions will receive a notice of registration acceptance and will be issued a global intermediary identification number.
The IRS will electronically post the first IRS Foreign Financial Institution (FFI) List in June 2014, and will update the list monthly. To ensure inclusion in the June 2014 IRS FFI List, financial institutions will need to finalize their registrations by April 25, 2014.
Access to the FATCA registration system and related support information can be found on theFATCA page of IRS.gov.

Explore a Quick and Simple Way of Understanding Taxes

 
If you’re a student or teacher, the summer months may be a nice break from class, but they’re also a good time to learn something new. A quick and simple way to learn about taxes is by using the IRS Understanding Taxes program.
The program is a free online tool designed in partnership with teachers for classroom use. The interactive tool is a great resource for middle, high school or community college students. However, anyone can use it to learn about the history, theory and application of taxes in the U.S. 
 
Here are seven reasons why you should consider exploring the Understanding Taxes program:
 
1. Understanding Taxes makes learning about federal taxes easy, relevant and fun. It features 38 lessons that help students understand the American tax system. Best of all, it’s free!
 
2. The site map helps users quickly navigate through all parts of the program and skip to different lessons and interactive activities.
 
3. A series of tax tutorials guide students through the basics of tax preparation. Other features include a glossary of tax terms and a chance to test your knowledge through tax trivia. Interactive activities encourage students to apply their knowledge using real world simulations.
 
4. Understanding Taxes makes teaching taxes as easy as ABC:
  • Accessible (web-based)
  • Brings learning to life
  • Comprehensive
5. It’s easy to add to a school’s curriculum. Teachers can customize the program to fit their own personal style with lesson plans and activities for the classroom. They will also find links to state and national educational standards.
6. The program is available 24 hours a day. All you have to do is access the IRS website and type “Understanding Taxes” in the search box.
7. There are no registration or login requirements to access the program. That means people can take a break and return to a lesson at any time.
You can use the Understanding Taxes anytime during the year. The IRS usually updates the program each fall to reflect current tax law and new tax forms.
 
Additional IRS Resources:

IRS Offers Tips on How to Amend Your Tax Return

 

If you discover an error after you file your tax return, you can correct it by amending your return.

Here are 10 tips from the Internal Revenue Service about amending your federal tax return:

1. When to amend a return.  You should file an amended return if you need to correct your filing status, number of dependents, total income, tax deductions or tax credits. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list additional reasons to amend a return.

2. When NOT to amend a return.  In some cases, you don’t need to amend your tax return. For example, the IRS usually corrects math errors when processing your original return. If you did not include a required form or schedule, the IRS will send you a request for whatever is missing.

3. Form to use.  Use Form 1040X to amend a previously filed Form 1040, 1040A, 1040EZ, 1040NR or 1040NR-EZ. Make sure you check the box to show the tax year that you are amending on the Form 1040X. You cannot e-file an amended return. You must file an amended tax return on paper.

4. Multiple amended returns.  If you’re filing an amended return for more than one year, prepare a separate 1040X for each return. Mail them in separate envelopes to the appropriate IRS processing center. (See “Where to File” in the instructions for Form 1040X.)

5. Form 1040X.  Form 1040X has three columns. Column A shows figures from the original return. Column B shows the changes you are making. Column C shows the corrected figures. There is also an area on the back of the form where you should explain the specific changes and the reasons for the changes.

6. Other forms or schedules.  If the changes involve other tax schedules or forms, attach them to the Form 1040X. Failure to do this will cause a delay in processing.

7. Amending to claim an additional refund.  If you’re expecting a refund from your original tax return, don’t file your amended return until after you have received that refund. You may cash the refund check from your original return. The IRS will send you any additional refund you are owed.

8. Amending to pay additional tax.  If you’re filing an amended tax return because you owe additional tax, you should file Form 1040X and pay the tax as soon as possible to limit any interest and penalty charges.

9. When to file.  To claim a refund, you generally must file Form 1040X within three years from the date you filed your original tax return or within two years from the date you paid the tax, whichever is later.

10. Processing time.  Normal processing time for amended returns is 8 to 12 weeks.

IRS Website Explains Tax Provisions of the Health Care Law; Provides Guide to Online Resources

The IRS has launched a new Affordable Care Act Tax Provisions website at IRS.gov/aca to educate individuals and businesses on how the health care law may affect them. The new home page has three sections, which explain the tax benefits and responsibilities for individuals and families, employers, and other organizations, with links and information for each group. The site provides information about tax provisions that are in effect now and those that will go into effect in 2014 and beyond.

Topics include premium tax credits for individuals, new benefits and responsibilities for employers, and tax provisions for insurers, tax-exempt organizations and certain other business types.

Visitors to the new site will find information about the law and its provisions, legal guidance, the latest news, frequently asked questions and links to additional resources.

Several other federal agencies have a role in implementing the health care law, including the Department of Health and Human Services, which has primary responsibility. To help locate additional online resources from the Department of Health and Human Services, theDepartment of Labor and the Small Business Administration, the IRS has issued a new Web-based flyer – Healthcare Law Online Resources (Publication 5093).

Back-to-School Tax Tips for Students and Parents

Going to college can be a stressful time for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs and maybe relieve some of that stress.

• American Opportunity Tax Credit.  This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. A recent law extended the AOTC through the end of Dec. 2017.

• Lifetime Learning Credit.   With the LLC, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.

You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. For example, you can claim the AOTC for one student and the LLC for the other student.

You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for these credits. The tool is available at IRS.gov.

• Student loan interest deduction.  Other than home mortgage interest, you generally can’t deduct the interest you pay. However, you may be able to deduct interest you pay on a qualified student loan. The deduction can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it.

These education benefits are subject to income limitations and may be reduced or eliminated depending on your income.

For more information, visit the Tax Benefits for Education Information Center at IRS.gov. Also, check Publication 970, Tax Benefits for Education. The booklet’s also available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).